REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2926  OF 2011 [Arising out of SLP (C) No. 10522 of 2008]

Pepsico India Holdings Ltd.                 …. Appellant

Versus

Commissioner of Trade Tax, Lucknow, U.P.     ...Respondent

JUDGMENT

Dr. Mukundakam Sharma, J.

1. Leave granted.

2. The  present  appeal  arises  out  of  the  judgment  dated  

10.12.2007 passed by  the learned Single  Judge  of  the  

High Court of Allahabad (Lucknow Bench) whereby the  

learned Single Judge has dismissed the tax revision filed  

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by the Appellant under section 11 of the U. P. Trade Tax  

Act (hereinafter referred to as “the Act”) impugning the  

judgment  dated  14.8.2007  passed  by  the  Trade  Tax  

Tribunal,  Lucknow  rejecting  the  second  appeal  of  the  

appellant/assessee.

3. Various issues were raised before the Tribunal as well as  

the  High  Court  with  respect  to  the  liability  of  the  

appellant/assessee to pay tax which, in nutshell, are as  

follows: -

(i) That there is no transfer of rights of users by the  

assessee when he realized rental charges for glass  

bottles and crates.

(ii) The  forums  did  not  consider  the  terms  of  the  

agreement/contract between the assessee and his  

selling agents/consumers.

(iii) The  interest  charge  on  the  tax  could  not  have  

been charged under Section 8(1) as the case falls  

under Section 8(1B).  

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4. However, in the present appeal the issues Nos. (i) and (ii)  

were  dropped  by  the  appellant  as,  in  the  intervening  

period, the above said two issues were finally settled by  

the judgment of this court in the case of State of Orissa  

and another v. Asiatic Gases Ltd. (2007) 5 SCC 766.  

In the said case this court held that the previous decision  

of this Court in  Aggarwal Bros. v. State of Haryana  

(1999) 9 SCC 182, is fully applicable to rentals charged  

in respect of the containers for goods that cannot be sold  

without containers.  This court held that the containers  

constitute an integral part of the commodities in question  

and the container together with the contents therein is a  

“composite personality” and constitutes “goods” eligible to  

sales tax.  

5. Accordingly, the only issue which requires consideration  

in the present appeal is whether the appellant is liable to  

pay interest on the tax due under Section 8 (1) of the Act  

i.e. @ 2 % per mensem from the date the tax was due or  

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under Section 8 (1B) i.e. @ 1.5 % per mensum from the  

date of the assessment order and demand notice.

6. The  High  Court  and  the  other  forums  below,  for  the  

reasons mentioned therein, have held that the appellant  

is  liable to pay interest  on the delayed payment of  tax  

under section 8 (1) of  the Act (i.e. @ 2 % per mensem  

from  the  date  of  filing  of  returns).  Whereas,  it  is  the  

appellants case that the interest is payable as per section  

8  (1B)  of  the  Act  (i.e.  @ 1.5  % per  mensum from the  

expiration of the date mentioned in the assessment order  

which in the present case is March 15, 2002).

7. As a short question is involved we need not mention the  

facts of the case in great detail. In brief the facts leading  

to the filing of the present appeal are that the appellant is  

engaged  in  the  manufacturing  and  selling  of  the  

beverages and is  having bottling plants in  the  state  of  

Uttar  Pradesh.  The  dispute  pertains  to  the  trade  tax  

payable on its turnover of Rupees 8.54 crores in respect  

of rentals by distributors of glass bottles and crates for  

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assessment year 1999-2000. The appellant disputed the  

liability  to  pay  tax  on  such  turnover  as  well  as  the  

interest, as according to them no tax is payable on the  

rental  of  glass  bottles  and crates  as the  same did not  

amount to a transfer of  right to use the  goods for value  

or consideration under section 3-F of the Act. However,  

the said submission was negated by the first and second  

appellate authority as well as, on revision, by the High  

Court.  As  mentioned  hereinabove,  the  challenge  to  the  

liability to pay tax was dropped by the appellant in the  

light  of  the  judgment  passed  by  this  Hon’ble  court  in  

Asiatic Gases Ltd. case (supra).

8. We  heard  the  learned  counsel  appearing  for  both  the  

parties and perused the record. It was submitted by the  

learned senior counsel appearing for the Appellant that  

as  it  was the bonafide  belief  of  the  appellant/assessee  

that  they  were  not  liable  to  pay  tax  on  the  turnover  

realized as rental from the bottles and crates, therefore,  

the  tax  should  be  charged  only  from  the  date  of  the  

assessment order and not from the date of filing of the  

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returns. It was further submitted that section 8 (1) of the  

Act  only  becomes  applicable  when  the  assessee  had  

admitted its tax liability in its accounts or its return and  

as the  appellant/assessee had disputed the liability to  

pay tax and raised a bonafide dispute they would not be  

liable  to  pay  interest  under  Section  8  (1)  of  the  Act.  

Resultantly, interest, if any, can only be charged under  

Section B (1B) which covers the cases which does not fall  

within   the ambit of Section 8 (1) of the Act.  

9. All  the  abovesaid  contentions  were  negated  by  the  

counsel  appearing  for  the  respondent  and  it  was  

submitted  that  after  disclosing  the  turnover  in  its  

accounts a dealer cannot run away from his liability to  

pay tax by raising false and frivolous dispute. In case, if  

he  does  so  then he  will  be  liable  to  pay  penal  rate  of  

interest under section 8 (1) of the Act.

10.Section 8 (1) of the act, prior to its amendment in 2002,  

is reproduced below:

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“8. Payment and recovery of tax:

(1)  The  tax  admittedly  payable  shall  be  deposited  within the time prescribed or by the thirty-first day of   August,  1975, whichever  is later  failing which  simple  interest  at  the  rate  of  2  per  cent  per  mensem  shall   become due and be payable on the unpaid amount with   effect from the day immediately following the last date   prescribed or till  the date of payment of such amount,   whichever  is later  and nothing contained in section  7  shall  prevent  or  have  the  effect  of  postponing  the  liability to pay such interest.

Explanation: - For the purposes of this sub-section, the   tax admittedly payable means the tax which is payable   under this Act on the turnover of sales or, as the case   may  be,  the  turnover  or  purchases,  or  of  both,  as   disclosed in the accounts maintained by the dealer, or   admitted by him in any return or proceeding under this   Act,  whichever  is  granted,  or,  if  no  accounts  were   maintained then according to the estimate of the dealer  and includes the amount payable under Section 3B or   sub-section (6) of section 4B.”

11. The explanation to the said subsection clearly defines the  

term  “the  tax  admittedly  payable”  and  illustrates  the  

situation  in  which  the  tax  would  be  deemed  to  be  

admittedly payable, the same are as follows: -

(i) The tax which is payable under this Act on the  

turnover  of  sales,  as  the  case  may  be,  the  

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turnover of purchase, or both, as disclosed in the  

accounts maintained by the dealer.

(ii) The tax admitted by the dealers in any return or  

proceeding under this act, whichever is greater.

(iii) If  no accounts were maintained, then according  

to  the  estimate  of  the  dealer  and  includes  the  

amount payable under section 3-B or subsection  

(6) of section 4-B.

12.It is not in dispute in the present case that the appellant  

has themselves mentioned in their accounts the turnover  

in respect of rentals by distributors of glass bottles and  

crates. However, the appellant has disputed that the said  

turnover is liable to tax under the Act.

13.The question that emerged for adjudication before forum  

and Court  below was  that  whether  the  tax  is  payable  

under  the  Act  on  the  turnover  from  rentals  of  glass  

bottles and crates. The Court has answered the question  

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in affirmative and confirmed that on such turnovers the  

tax will be payable under the Act.  

14. The  appellant  had  taken  the  chance  to  get  a  judicial  

verdict on the said issue. Once it has been confirmed that  

the  tax  is  payable  under  the  Act,  the  same  becomes  

payable from the date when it was due and not from the  

date  when the  judicial  verdict  was pronounced (unless  

and until, in a case, the court specifies a particular date  

from which it shall be payable). Thus, once it has been  

confirmed by the Court that the tax is payable under the  

Act it would be covered within the definition of the term  

“the tax admittedly payable” as defined in the explanation  

to section 8 (1) and, in case, the tax had not been paid  

then the same becomes payable  along with interest  as  

mentioned in section 8 (1) of the Act.

15. Provisions of subsection (1B) of section 8 of the act will  

come into operation only if the case is not covered under  

subsection (1) of section 8 of the Act. The opening words  

of the said subsection (1B) states “if the tax, other than   

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the  tax  referred  to  in  subsection  1,  assessed  by  the   

assessing authority  is not paid”.  The said subsection is  

reproduced herein below for reference: -

“Section 8(1B) – If the tax, other than the tax referred to  in sub-section (1), assessed by any Assessing Authority   is not paid within the period specified in the notice of   assessment and demand referred to in sub-section (1- A), simple interest at the rate of one and half per cent  per mensem on the unpaid amount calculated from the  date of expiration of the period specified in such notice   shall become due and be payable.”

16.As  in  the  present  case  the  tax  becomes  admittedly  

payable  once  it  has  been held  that  the  tax  is  payable  

under the Act, the interest would be payable in terms of  

subsection (1) of section 8 of the Act and not in terms of  

subsection (1B) of Section 8 of the Act.

17. This court in the case of Commissioner of Sales Tax v.  

Qureshi Crucible Centre, 1993 Supp (3) SCC 495 has  

held that where a dealer fails to pay tax at the correct  

rate because he claimed not to know the revision in the  

rate, the dealer remains liable to pay interest at a higher  

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rate, penal rate under section 8 (1) from the date when  

the  tax  became due  and payable.  In  such a  case,  the  

dealer cannot claim that he is liable only from the date of  

the  assessment  order  fixing  the  correct  rate  of  tax.  

Similarly, in case where the dealer has taken a chance  

and it has been held that the tax is payable under Act,  

the  same becomes payable  from the date  when it  was  

due.

18.Accordingly,  the  present appeal  dismissed but without  

any orders as to costs.

                                                    ………………………………..J.

                                               [Dr. Mukundakam Sharma]

.……………………………….J.       [Anil R. Dave]

New Delhi, April 5, 2011

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